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Gold ETF Falls For 7th Week: A Diversified Strategy For Uncertain Times

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ETFs tracking major stock indexes closed modestly higher on Friday ahead of the Christmas holiday. The stock market will be closed on Monday.

SPDR S&P 500 ( SPY ) eked out a 0.1% gain on the stock market today and a 0.3% gain for the week.

Gold was in the spotlight on Friday, as it fell for the seventh week in a row.

However, some strategists still hold a positive long-term view on gold, citing investors' loss of confidence in central banks and the uncertainty following Donald Trump's presidential election win.

[ibdchart symbol="GLD" type="weekly" size="quarter" position="leftchart" ]

SPDR Gold Shares ( GLD ), the largest gold-backed ETF, melted after the Nov. 8 election.

It came under further pressure last week following the Fed's decision to raise interest rates and to signal three rate hikes for 2017 - more than the consensus two.

Higher interest rates put downward pressure on the yellow metal, which bears no yield.

Diversified Gold Strategy

From Nov. 8 to Dec. 22, the SPDR Gold ETF booked a loss of 11.9% as the dollar surged to its highest level in 14 years.

But currency-hedged peers, which seek to neutralize risk from a rising dollar, held up better.

AdvisorShares Gartman Gold/Yen ( GYEN ) and AdvisorShares Gartman Gold/Euro ( GEUR ) lost 1.4% and 7.3%, respectively, since the election.

These commodity ETFs use foreign currencies to invest their assets in the gold market. They are ideal for investors who are bullish on both gold and the greenback .

Gold priced in the euro has gained 9.7% year to date, through Dec. 22, as tracked by GEUR.

Gold priced in the U.S. dollar has risen 6.0% over the same period, as tracked by GLD.

GEUR, which launched in 2014, has outperformed GLD over the past two years as well.

Yet GEUR has been slow to gather assets. It holds $18.59 million and trades roughly 30,000 shares on average a day.

If gold investors are unsure about the direction of the U.S. dollar, they would be better off diversifying with ETFs, Noah Hamman, CEO of AdvisorShares, told IBD via email on Friday.

He suggested that those investors could allocate to GEUR and GYEN alongside other gold ETFs that invest in gold in dollar terms, such as GLD or iShares Gold Trust ( IAU ).

A blend of GLD, GEUR and GYEN also gives investors a slightly smoother ride in their gold exposure over time, he added.

Gold serves as a safe-haven asset. It tends to rise when the markets are under stress - and so does the dollar.

"Holding gold in a non-U.S. dollar denominated currency may help to limit the downside risk during stressed market environments, where the U.S. dollar becomes a safe haven store of value," AdvisorShares notes on its website.

Gold mining stocks also have tumbled after the Nov. 8 election and recent Fed rate hike.

VanEck Gold Miners (GDX) sits 39% below its August high.

IBD'S TAKE: ETF investors have a wealth of choices when it comes to investing in gold for different market conditions.

12 Bellwether ETFs

Here's a look at the performance of major exchange traded funds across key asset classes on the stock market today.

The Relative Price Strength (RS) Rating measures a stock's price performance over the last 12 months vs. all stocks and ETFs, on a scale of 1 to a best-possible 99.

SPDR S&P 500 ( SPY ), +0.1%, RS 57

PowerShares QQQ (QQQ), +0.1%, RS 54

SPDR Dow Jones Industrial Average (DIA), 0%, RS 65

IShares Core S&P Mid-Cap (IJH), +0.2%, RS 66

IShares Russell 2000 (IWM), +0.5%, RS 72

IShares MSCI EAFE (EFA), +0.3%, RS 38

Vanguard FTSE Emerging Markets (VWO), +0.5%, RS 38

SPDR Gold Shares ( GLD ), +0.3%, RS 17

United States Oil (USO), +0.9%, RS 59

IShares Core U.S. Aggregate Bond (AGG), 0%, RS 30

PowerShares DB U.S.$ Bullish (UUP), -0.1%, RS 54

IPath S&P 500 VIX Short-Term Futures (VXX), -0.5%, RS 1

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Stock ETFs Rally; One Hot Tip For Investing In Gold As Dollar Surges

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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